The so-so, the bad and the ugly: Taking stock of a deeply flawed state budget

By: - September 21, 2015 12:28 pm


The proverbial elephant labored and, against all hopeful expectations, brought forth a mouse. The “elephants” who run the Republican-controlled General Assembly labored and now have brought forth, if not a mouse, then a state budget that is completely underwhelming as a vehicle for making North Carolina a better place for all of its residents to live.

Yes, some of the roughest edges in the very conservative Senate’s budget approach were smoothed down in the course of negotiations with the moderately conservative House. But we’re still left with a state government forced to operate on a scaled-back revenue stream that’s hardly sufficient to meet the state’s many needs for public services, education especially.

At least the budget was finalized after ample debate, with important decisions on taxes and spending made after thorough, public review and due consideration of the pros and cons.

Whoops, that must be some other state we’re thinking of – some paragon of civic responsibility. South Carolina, perhaps?

The sorry truth of the matter is that our legislature blew right past its nominal June 30 deadline for enactment of a new budget covering the ensuing year and then descended into a two-month alley fight between leaders of each chamber – no spectators allowed.

One shudders to imagine the deal-cutting, log-rolling, machinations and threats that went on during those weeks, with only the favored few among all 50 senators and 120 House members allowed to play a role or even kept slightly in the loop.

Then, after a final round of secretive summit meetings between Senate President Pro Tem Phil Berger and House Speaker Tim Moore, voila! Here’s the budget, ladies and gentlemen! Just go ahead and vote it on through! Sure, it’s 429 dense pages and it includes stuff that’s never had a public airing, but time’s a-wasting!

Gov. Pat McCrory must have been left muttering to himself. The governor had signaled that he wasn’t happy with some of the tax changes cooked up by his fellow Republicans, but they must have invoked the old adage that a man has a right to beat his own mule.

The helter-skelter timetable painted McCrory into a corner. A new budget needed to be put in place sometime on Sept. 18, before a temporary budget resolution expired at midnight. And if the governor had been inclined to issue a veto, Republican majorities in the House and Senate could have knocked it aside.

So on Sept. 17, with the Senate having approved the budget the day before and House action imminent, McCrory put the best face he could on the deal and said he’d sign it to meet the Sept. 18 deadline. It amounted to yet another instance of the legislature giving the governor his marching orders and pulling him even farther to the right.

Could have been worse

For all that, let’s give some credit where credit is due to legislators, presumably with McCrory’s encouragement, who managed to extract some damaging proposals from the final budget agreement.

Those would include House members who stood up for early-grade teacher assistants after the Senate wanted to get rid of 5,000 or so in the name of smaller class sizes. Allowing elementary school teachers to be responsible for fewer students makes good sense, but not if at the same time they lose the assistants who provide valuable help in classroom management and one-on-one attention.

Senate leaders finally consented to a deal (with strings attached) keeping the assistants on board – a $138 million item within the $21.74 billion budget. That was a tribute to the persistence of their House counterparts.

Republicans, of course, made the decision. But legislative Democrats, even if badly outnumbered, kept up a drumbeat of advocacy on behalf of public education that their colleagues across the aisle must have sensed would resonate with the voters. As it should – and as the Council of Churches, which sees strong education programs as the most reliable path to opportunities for all, hopes it will.

The education news wasn’t all rosy – for example, GOP legislators agreed to broaden the Opportunity Scholarship program, which subsidizes tuition for private school students and risks draining resources from the public schools. As many as 6,000 scholarships could be awarded for the next school year, up from the current figure of 2,000 or so.

But the final budget does raise the pay of junior teachers. It provides more money for textbooks and other materials, and it channels money into a program aimed at helping kids learn to read during those crucial early grades. It funds a continuation of drivers’ ed offered through high schools at a modest cost to families, promoting highway safety.

Costlier repairs

A major tax change that emerged from the budget deal-making was touted by Senate supporters as a way to boost the finances of the state’s less-affluent, mostly rural counties – making it easier for them to build schools, for example.

There’s no question that North Carolina’s rural counties have struggled to raise the money to meet their responsibilities for school construction and to compete for qualified teachers with salary supplements. Deficiencies in the school systems in those areas have led to landmark court judgments affirming the state’s duty to ensure equal opportunities for meaningful schooling – “sound basic education,” as the state Supreme Court put it.

But instead of helping poor counties via income taxes broadly levied according to people’s ability to pay, the new budget takes another plunge into conservative ideology by generating the money from ramped-up sales taxes.

Consider a family trying to keep an old car on the road, perhaps because they can’t afford to replace it. What if it needs new brakes or a new alternator, which don’t come cheap? Because the new budget imposes the sales tax on expenses for “repair, maintenance, and installation services,” an extra charge will be tacked onto their repair bill.

At 6.75 percent, the combined state and local tax on a $500 charge at the garage would be $33.75 – maybe not the last straw that means giving up the car, but surely an insult added to injury. (The fellow having the air-conditioning fixed on his luxury SUV probably would just shrug his shoulders and pay up.)

Additional revenue from the local portion of the sales tax will be parceled out according to a formula that so far has defied explanation other than that it leaves tourism-heavy counties such as Dare and urban counties such as Wake, Durham and Mecklenburg with peanuts, if anything at all. The notion of more state support for disadvantaged counties, to help build schools or meet other needs, is worthwhile. But raising that money from taxes that will be most burdensome for people facing heavy repair bills pushes North Carolina further away from its long-standing, sensible commitment to the income tax as state government’s chief revenue source.

Also prominent on the budget’s good news-bad news continuum: The tax credit for historic preservation projects, which some senators had fought to kill, will be retained – a boost for many struggling towns across the state. But Senate opponents of the tax credit for renewable energy projects, including solar, got their way. That’s a blow to the state’s move toward energy conservation and reduced use of fossil fuels.

Tax-shift sequel

Until 2013, when the Republicans gained a free rein to push their legislative agenda, the income tax had a progressive structure, with high-end earners paying at a higher marginal rate.

Now, in what’s cast as an effort to make North Carolina more economically competitive with surrounding states, income taxes – both individual and corporate – have been cut, and the individual tax has been stripped of its brackets. The tax currently stands at a flat 5.75 percent.

The pending budget would cut that figure starting in 2017 to 5.499 percent, albeit with a modest increase in the standard deduction and a restored deduction for medical expenses. That cut continues a trend by which Republican legislators have sapped government of revenues totaling many hundreds of millions annually compared with what would have been raised under the former tax code. Factoring in the higher sales taxes, Speaker Moore pegs the new budget’s overall “tax relief” – i.e., revenue loss – at $400 million.

Anyone who has to write a check to the tax collector understands the pain, and no one wants to see taxes set so high that they stifle initiative and investment.

Still, North Carolina’s not inconsiderable economic successes over recent decades – concentrated, to be sure, in the cities and their environs, where technology and financial industries have prospered – have depended not on low taxes and government stinginess, but on a clear-eyed understanding of how ample revenues, fairly raised, serve the greater good. Those revenues pay for good schools, a strong and accessible university system, programs to uphold public health and protect the environment.

Skepticism toward the ability of government to help people improve their lives may be conservatives’ stock in trade. The Council of Churches, though, stands on the belief that a government that is well-resourced, efficient, open in its dealings and equitable in the burdens it imposes can in fact render that help.

We must hope that our public servants, even working with a budget that is deeply flawed, will in the end do their duty by their fellow citizens.

Steve Ford, former editorial page editor at Raleigh’s News & Observer, is now a Volunteer Program Associate at the North Carolina Council of Churches.

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Steve Ford
Steve Ford

Steve Ford, former editorial page editor at Raleigh’s News & Observer, wrote this commentary for the North Carolina Council of Churches, which was first to publish it at